Friday, August 20, 2010

The neocolonial path to power

Ratna Sansar Shrestha

As is his wont Dipak Gyawali has pointed out that the emperor isn’t actually wearing any gorgeous royal gown, as his subjects are led to believe; rather he is wearing nothing in his article titled “The neocolonial path to power” published in Himal South Asian of August 2010 (http://www.himalmag.com/The-neocolonial-path-to-power_nw4642.html) which is based on the translation of his article published in vernacular “Nepal” magazine. It’s not unusual for him to attract wide ranging comments and this article is no exception.

Some comments have been made as a reaction to the use of the phrase “neocolonial path”. Politically speaking Bhutan is an Indian protectorate (there is no point in beating around the bush about it) and it will not be efficacious use of time for this scribe to try to distinguish between a colony and a protectorate. However, it is crystal clear that Bhutan is not an independent country comprising of sovereign people. But, DipakG didn’t use the phrase neocolonial because of this hard and cold ground reality. He must have been endeavoring to give a name to the modality of hydropower development in that country and in his article he clearly is cautioning Nepal’s hydrocracy (politicos, policy makers, planners, bureaucrats, intelligentsia, etc. related to hydropower) from following Bhutanese footstep which will lead to neocolonial exploitation/development of Nepal’s water resources. The phrase “banana republic” must also have been coined from similar Central American experience. Parallels could also be drawn from the collapse of Russian economy based on exploitation/extraction of mineral raw materials as well.

However, it doesn’t come as a surprise that the people in Bhutan aren’t too proud of this geopolitical fact of life; nor like being reminded of it. In their resentment with this geopolitical fact, with which they are destined to live till some distant future, they even try to equate themselves to Nepal thereby attempt to pull Nepal (a sovereign and independent country) down a notch or two to their own level. There is no point in being upset with them when people in Nepal, professing to be nationalistic, do go about advocating that Nepal must metamorphose into another Bhutan by replicating Bhutan model. Bhutanese people must be awestruck to learn of some people in Nepal wanting to stoop to their level – demonstrating their willingness to cede Nepal’s sovereignty and independence which Bhutan would give anything to achieve. DipakG’s article is a clarion call for the protagonists of replicating Bhutan model in Nepal to wake up from their slumber induced by the warmth of wet bed and remember that once the mattress cools off it will become very uncomfortable as is being amply demonstrated by what is transpiring in Bhutan.

Bhutan is source of power for India

Bhutanese people must have felt the taste of magnanimity after reading that “Bhutan PM pledges power aid for India” in Times of India (ToI) of June 20, 2009, making Bhutan a source of power for India. For a country as tiny as Bhutan, being able to “aid” India – the giant neighbor – must have been a breathtaking experience. The proponents of Bhutan model in Nepal are also salivating due to this very possibility. They have been going about saying that Nepal can wield immense power (not in the sense of energy related power) over India by a magnitude if Nepal were to export power in huge quantum to India, as the switch to power to India will lie in Nepali hands. It is beyond their foresight and comprehension that India will easily circumvent such a possibility by “demanding” to ensure security of such project(s) by Indian the security personnel. Most people aren’t aware that Karnali Chisapani project, 10,800 MW, was shelved in 70s by the then royal government of Nepal as it received not so subtle hints that India would like to ensure security of the project by Indian the security personnel (vide “India-Nepal Relations – Challenges Ahead” by Jagat Mehta, former secretary of ministry of foreign affairs of India).

Power is input for economic activity

But gems of truth are coming out of Bhutan itself. Kuensel online of July 22, 2009, writing under the heading “Power-profit home advantage”, has stated that “contrary to existing notions, a new study says it is economically more beneficial for Bhutan to supply power to its industries than export to India. The study, by the ministry of economic affairs (MOEA) and the royal audit authority, compares revenue foregone by the government in not exporting subsidized electricity against the money gained as taxes from 15 major industries, which represent 95 percent of industrial power consumption. Here, in spite of the subsidy, the net benefit is about Nu 64m. In the second model, it compares cost of production and distribution of electricity to the tax revenue gained from industries. Here again, there is a benefit of Nu 152.8m over and above cost of production.”

“Electricity is the only plentiful raw material, which can be used by our industries to compete with external competitors by value adding on the reasonably priced power,” said economic affairs minister Lyonpo Khandu Wangchuk.

Economic affairs secretary Dasho Sonam Tshering is reported to have said, “Value addition on both electricity and local raw materials, like in the case of Penden and Dungsam cement plants, will be more sustainable in the long run, even if electricity prices change in the region”. He even is reported to have alluded to Norway which “also used its hydropower to initially bankroll its industrial development through power intensive metallurgy and fertilizers”.

Power for domestic consumption

On the other hand export oriented development of hydropower in Bhutan has resulted in different negative externality. Under the headline “Power crisis looms large over Bhutan?” Zeenews.com has reported, on June 16, 2008 that “A severe power shortage may hit Bhutan in view of new industries readying up to kick start operations even as India is banking on borrowing electricity from the Himalayan country by 2020.” It goes on to add that “ Bhutan may talk of thousands of megawatts of power in the next few years but according to Bhutan power corporation limited (BPCL) officials, the country will face a deficit in that period because a lot of upcoming industries will need power to operate. BPCL executive director K B Wakhley has been reported to have said that “If all the industries in Pasakha and Phuentsholing come on stream, there will be a shortage of power," said.

Similarly Kuensel online of February 9, 2010, writing under the title “Huge power shortage expected” has reported that “Bhutan, rich in hydropower could face power shortage, up to 20 MW, by the late winter months of 2010 and early 2011.” Moreover, Kuensel online of April 15, 2010 has reported that “Dagana crippled by power cuts.” Dagana residents are, reportedly, so frustrated with the erratic power supply in their dzongkhag that they are asking Bhutan Power corporation (BPC) for an alternative source of electricity. Power supply is disrupted two or three times a day, which civil servants, businessmen and local residents say is affecting their day-to-day activities. On weekends, the dzongkhag suffers a power blackout. “The disruption isn’t new, it’s been there for years, but the situation worsened this year,” said a town resident. A civil servant told Kuensel that their performance is hampered, since all activities are disrupted due to frequent power failure.

Further, Kuensel online of May 3, 2010 has reported that “Power shortage likely this winter.” It reports that Bhutan could face a shortfall of power this winter, with domestic demand projected to touch 300 MW (megawatt), when total generation shrinks to around 282 MW in the cold months. The 300 MW demand projection is based on the domestic demand growth rate, which has been increasing at an average of 26 percent in the past three years. This deficit is likely to be borne by the energy intensive industries the biggest users of energy within the country.

Like ostrich, some people are hiding their collective heads in the sand, but it will not make the potential disaster vanish and, therefore, people need to review this modality of hydropower development not only in Bhutan but also in Nepal.

Financially unsustainable model

Due to the unique geopolitical relationship between India and Bhutan three projects so far built in Bhutan, aggregating a capacity of 1,416 MW, are owned by Bhutan but funded by India through 60% grant and 40% soft loan touted as the ‘inter-government model’. However, even Indian government is finding out that this is not a sustainable model. Reporting under the heading “Power ministry jittery on Bhutan investments” ToI of November 9, 2009 has mentioned that “The power ministry is getting the jitters over venture models for setting up hydel projects committed to Bhutan, with an view emerging that the amount of investments India will have to make at one go till 2020 under the present inter-government arrangement may adversely affect our budgetary provisions.”

Kuensel online of 10 November 2009 has quoted, ToI news story, under the heading “Misgivings on inter-govt. model.” It has been reported that “India’s investment in Bhutan’s 10,000 MW hydro projects could have an adverse impact on their annual budgetary provisions if it is in the ‘inter-government model,’ according to records of a recent meeting called by the Indian power sector officials.

The report, according to ToI, says that India, under the inter-government arrangement, is committed to building projects of 10,000 MW by 2020. For this to happen, India will have to take up many projects at one go on a fast-track, requiring an investment of Rs 500 billion at Rs 45 billion per year till 2020.

Therefore, Indian government is endeavoring to drastically reconfigure the inter-government model. Kuensel online of December 30, 2009 has reported that “the Indian government has proposed that future hydro projects be done on a 70 percent loan and 30 percent grant basis, according to reliable sources. The Bhutanese government has not yet agreed to it.” Kuensel online of January 11, 2010 continued with the same news story

With this drastic change in the configuration “gross national happiness” is bound to transform itself into “gross national unhappiness.” Under current arrangement (60% grant 40% soft loan), Bhutan, apparently seems to be gaining even by exporting power at dirt cheap rate. But once it is juxtapositioned, percolation into Bhutanese economy will shrink by a magnitude. It must be remembered that due to the underdeveloped state of Bhutani economy there is no backward linkage, no forward linkage, and no investment linkage for its “famed” hydropower development and it won’t take too long to achieve “gross national unhappiness” of significant level.

Conclusion

Therefore, in view of Bhutan’s need for power/energy for it to grow out of its medieval economic state export oriented development of hydropower is unsustainable. Similarly, this model is financially unsustainable for India to continue to spoon feed.

Neither is this model replicable in Nepal. Because for a population of 28 million in Nepal, India will have to finance 52,864 MW under this modality (60% grant 40% soft loan). However, Indiahas already reached financing fatigue after financing 1,416 MW (relatively smaller quantum) in Bhutan for a population of 750,000.

Hence, it is time for the hydrocracy (politicos, policy makers, planners, bureaucrats, intelligentsia, etc. related to hydropower) in Nepal to grow out of their short sighted juvenile vision for Nepal’s hydropower development.

From the above it is clear that we are getting to hear the same thing from the horse’s mouth. It just takes a little bit of digging to come up with gems of wisdom. The likes of this scribe and DipakG are only a little ahead of time. A number of articles on this very topic written by this scribe are available in his website.